This Apple Bull Isn’t Upbeat About iPhone Sales

Even an
Apple
(AAPL) bull thinks the near-term picture for iPhone sales could get worse.

Baird analyst William Power, who has an Outperform rating and a $185 price target on the tech company’s shares—a few bucks above FactSet’s average near $180—on Thursday wrote that consensus earnings estimates for the second-quarter and full year are “still too high given challenging conditions in China and elsewhere.”

But Power is already looking toward the second quarter, during which he estimates that Apple will report $57.3 billion in revenue, below FactSet’s $59.3 billion average, which incorporates a 38% sequential decrease in iPhone sales. Last year, the decrease was about the same. Power figures it could be 41.5% this time around.

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“Given commentary from Apple that China worsened through the quarter, coupled with ongoing macro uncertainties and continued slow upgrade cycles, we assume that the March quarter decline will be worse than normal seasonality,” he wrote.

Shares of Apple were recently down nearly 1% to just under $153 as broader U.S. markets were flat. A CNBC report, confirmed by the company, said Apple had laid off more than 200 workers from its autonomous vehicle team. Some workers affected by the move were being shifted to other parts of the company, the report said.

Analysts at Macquarie Research, who have a Neutral rating and a $149 price target on Apple shares, wrote Thursday that economic issues in China may be contributing to pressure on app store revenues as some companies—including
Netflix
(NFLX)—seeking to avoid paying the fees Apple requires. (A recent Bloomberg story explains this dynamic, and its effect on users, in helpful detail.)

In China, Macquarie, all app spending—including both Apple and Android platforms—grew 23% in 2018, down from 41% a year earlier, as the U.S. outpaced China for the first time in years.

Shares of Apple are down over 3% in 2019 and roughly 12% over the past year.

“Much of the concern may be priced in,” Power wrote. “We remain positive long-term on Apple’s ecosystem benefits, impressive services growth and strong cash flow. But we would be more cautious near-term until estimates are more fully reset.”

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